We'd like this blog to be accessible to more than those schooled in capital 'T' Theory. Instead we aim to expand the conversation and bring more and more folks into the dialogue around our question: How do we understand the current crisis in capitalism, and what would be a response that leads toward human emancipation? And so we're creating a glossary of important theoretical terms. This is not supposed to be authoritative but a living document that changes as our dialogue progresses. Each entry will be posted as a blog post as well, where we encourage comments that challenge and refine.

Table of Contents:
Economic growth
The accumulation of capital


Economic growth

Economic growth is the expansion of the total value of the saleable commodities in the economy. That seems pretty straightforward – more goods and services being produced and purchased. It’s actually quite a bit more complicated than that, because the concept of value is not as self-evident as it appears. But let’s leave that aside for now, because I don’t think we need to get into the intricacies of different theories of value to nail down the main determinants of economic growth.

There are two basic variables here, which correspond to production and purchase: investment and demand. One driver of growth is investment in new productive facilities or more productive technologies. The distinction must be made between productive investment and other vernacular uses of the word investment: not “investment” in a house or a car, which is a form of consumption, and not investment in financial assets if these are actually part of a speculative bubble. Speculative investment produces the appearance of growth, but not the reality.

Investment can be undertaken by the government or by private business. If the government does it, investment is funded out of taxes or other revenue; if business, it’s funded by profits. But both government revenue and profits are routinely devoted to unproductive ends, like military spending, healthcare, luxury consumption, or pyramid schemes. Some non-productive spending is socially desirable and some is not. That distinction doesn’t matter to capitalism as a system or to economic growth. What does matter is whether government revenues and profits are invested in expanding production or not.

The other side of the equation is demand. Expanded production will not contribute to economic growth if the products can’t find a market, so the other possibility for increasing growth is to increase demand. This can be done either by convincing people who already have money to spend more of it, or by increasing the incomes of people whose existing demand is blocked by inadequate income. The former method relies on innovation: new product lines like the iPhone, new kinds of advertising to instill desires that did not exist before, new technologies so that producers will purchase new equipment. Increasing incomes is a more difficult proposition. It can be achieved either through the redistribution of existing incomes (but will only increase growth if those who on average lose income would not have spent as much of it as those who gain) or by redistributing a part of revenues from producers to consumers (but this will only increase growth if it does not cripple the all-important productive investment that producers might otherwise have pursued).

A final possibility for increasing growth in addition to strengthening investment (expanding value) and demand (realizing value) is to increase the efficiency of the circulation of value. This can be done by making it easier to move goods around (container shipping has been a huge advance in recent decades) or by improving methods of communication to make economic coordination more efficient. As the movement of value increases in speed, part of it is freed for reinvestment in new production, which can indirectly increase growth. But if this newly freed value is not invested productively, if instead it is put to strictly speculative uses, then real economic growth will not follow.

The complex tradeoffs in pursuing these approaches should already be apparent. For example, one way to increase demand is to divert money from profits to workers’ consumption (either individually by raising wages or through the government by increasing taxes on business and then spending the revenue on social programs). But this will reduce the funds available for productive investment. To avoid this kind of conflict, a careful analysis of the imbalances and dysfunctions of the economy is necessary to settle on measures that don't simply cancel out their growth effects.

Growth has stagnated in the United States, Japan, and Europe, and the eurozone crisis threatens to turn stagnation into collapse. Growth in China, India, Brasil, Turkey, Indonesia, and other “emerging markets” is proceeding for the moment, but there is a very real possibility that a large part of this growth is founded in speculative bubbles and vulnerable to abrupt deflation. Moreover, because these economies rely on exports to the rich countries, any further slowdown in the US, Europe, and Japan could cripple growth elsewhere. It seems clear that beneath the everyday distractions of bond market fluctuations and deficit deals, the paralysis of the growth process is what structures this crisis.

One additional method of renewing growth should be mentioned, because historically it has been both effective and common. If you destroy massive amounts of existing value, then both investment and demand can be restored through the process of rebuilding from the devastation. There are many forms that the wholesale destruction of value has taken, all of them catastrophic: inflation, deflation, war. If the current impasse is not broken in some other way, this is the prospect we face.


The accumulation of capital

The essence of capitalism is an ongoing accumulation of value. All complex societies are characterized by a social division of labor. Under these conditions, everyday life is structured by the need for individuals to produce some good that others will exchange for money, so that the producers can in turn use the money to purchase the goods they need to live their lives. Marx represented this process as C-M-C: commodity for money for commodity.

Capitalism is defined as a system by the inversion of this process: M-C-M'. Under capitalism, the end of sustaining life becomes only a means, and the means of exchanging money becomes the defining end. Of course, exchanging money for the same amount of money would be pointless, so the second process ends with M': a greater amount of money than was initially exchanged. This highly simplified schema maps out the underlying property of capitalism as a system, namely an endless accumulation of capital - growth for the sake of growth. This helps explain why GDP growth, despite the fact that it tells us almost nothing about the quality of life going on beneath it, is the central indicator of economic health under capitalism.

In order to expand itself, capital must successfully cycle thru the realms of both production and consumption. Value must first be produced, and it must then be realized by finding a buyer. However, there are different social configurations that can facilitate accumulation, with dramatic consequences for the nature of culture, class, politics, and social relations. In its history, capitalism has found expression thru a number of more-or-less coherent social systems that superficially can seem quite different but are all structured by the underlying dynamic of endlessly expanding production and consumption. Examples we will be discussing include postwar Fordism (1950s-1960s), neoliberalism, and whatever might succeed neoliberalism.

All of these systems, however, are marked by the inherent contradictions of capitalism. They can proceed in good health for decades at a time, but inevitably will run up against their inherent limits. If problems crop up in either the realm of production or consumption or the juncture between the two, the regime of accumulation will need to be adjusted. If the problems are systemic in nature, a completely new configuration of society supporting a new regime of production and consumption must be pursued. The breakdown of a regime of accumulation finds expression in chronic global crisis. The Great Depression of the 1930s, the crisis of the 1970s, and, perhaps, the current crisis of neoliberalism are all examples. 


In its most narrow usage, Fordism refers to Henry Ford's revelation that he could do better business if he paid his workers enough to buy the products of their labor. Of course, Ford's attempt to make good on the slogan in the 1910s completely failed since very few other capitalists were willing to leave behind the liberal period's method of high profits thru high exploitation. And of course, if capitalists actually did pay their workers the full value of their product, there would be nothing left over for profits, so the slogan really can't work in practice under capitalism.

Still, a system that superficially seemed to realize Ford's vision actually did take hold after World War II in the West and Japan, lasting roughly from 1949 to 1973. The architectonic restructuring of the economy that made this possible only emerged, however, thru the desperate struggle to overcome the impersonal violence of the Great Depression and its personalized (tho mechanized) counterpart of the two World Wars.

Both depression and war were symptomatic of the great collapse of the liberal period's mechanisms of self-reproduction, and only a massive restructuring of the global economy could return capitalism to health. The solution that finally emerged after three decades of tortuous conflict was based on the generalization of economic forms of organization that had been developing for many years: large bureaucratic enterprises, assembly-line mass production, rationalization — ie, deskilling — of the work process (Taylorism), production for a consumer mass market, active but domesticated and bureaucratized labor unions, and robust government regulation. All these threads finally came together under the pressures of mobilization for World War II, as the governments of each of the combatants forced reluctant capitalists and workers alike to accept the new system.

The new kind of capitalism was distinguished by a much more balanced and integrated relation among capital, labor, and the state (not to be mistaken, however, for equality). Labor renounced any demand for control over the production process, capital agreed to provide secure jobs with good wages and benefits, the state oversaw the accord and smoothed out its remaining unevenness thru Keynesian regulation and a solid commitment to social insurance and welfare programs. The new regime was also far more focused on the accumulation of capital within national boundaries than the aggressively expansionary capitalism of the late liberal period.

The forms of culture that emerged emphasized homogeneity and conformity. The economic priorities of rationalization, standardization, and planning bled over into all aspects of life, and a vision of steady material progress took hold, projecting a near-term future in which everyone would fit the basic mold of middle-class consumer and producer. This suited a highly bureaucratized economy and society defined by the alliance of big business, big labor, and big government.

In hindsight this culture appears stultifying and narrowly materialistic, but Fordism also had its attractive aspects. In the liberal period a huge section of the population had lived on the margins, suffering severe exploitation in sweatshop factory jobs or, worse, unable to find any kind of employment. Severe racial, ethnic, and class hatreds had flourished between the small bourgeoisie and the working majority, as well as among workers themselves, who battled each other for the scraps extended by the owners. Now the majority finally had access to a basic standard of material welfare, and the dominant culture embraced them rather than denouncing or simply ignoring them. Significant excluded minorities remained — most obviously, blacks in the US — but Fordism seemed to offer the promise of eventual inclusion, even if a mass movement would be required to secure it.

Moreover, Fordism proved extraordinarily successful as an economic system. On every important economic indicator — rates of growth, of employment, of productivity increase, of poverty reduction, and of profits — it performed better than neoliberalism did (even before the crisis). No wonder the 1950s and 1960s are known as the Golden Age of capitalism, even tho — or perhaps because —  market forces had waned to an unprecedented extent.

The same forces that defined Fordism were operative in the so-called Communist countries and other newly independent nations as well. Here the state and nationalism, of necessity, played much larger roles in both reshaping the economy and the culture, as the accumulated capital and disciplined workforce that the advanced countries enjoyed did not yet exist. As in the West and Japan, bureaucracy displaced market forces in the coordination of the economy, and a homogeneous national culture was promoted to replace the myriad divisions and inequalities of the prewar period. As in the advanced economies, economic performance was remarkable, especially in those countries that took these trends to their extremes: the Soviet Union and China.

Despite its success, Fordism generated forms of opposition that leveled fundamental critiques against it — most visibly, the wave of youth rebellion that swept the globe from 1966 to 1968 — as well as economic dysfunctions that finally precipitated its collapse in the protracted economic crisis of the 1970s. There can be no return to Fordism, but understanding it and its relation to neoliberalism may help us find a way out of the current crisis. 
Posted byWalker: 13 June 2011


Neoliberalism commonly refers to a set of free market ideas that became the dominant economic philosophy following the crisis of the 1970s. (The "liberalism" in neoliberalism refers to the classical liberalism of the 19th century founded on the thought of John Locke, Adam Smith, and others who advocated a strictly limited government, an unregulated market, and negative political liberties like freedom of speech. It should not be confused with American left liberalism of the 20th century, which it actually repudiates.) Drawing on 20th century critiques of government intervention in the economy by figures like Friedrich von Hayek and Milton Friedman, neoliberalism counseled an end to the welfare state and government regulation, blaming them for social ills ranging from the breakdown of the family to unemployment. Neoliberalism sees market forces as nearly infallible in achieving optimal outcomes, distributing resources in the most efficient manner and allotting income to those who actually create the wealth.

Government policies pursued under neoliberalism included privatization, deregulation, balanced budgets, floating exchange rates, free trade, and the free movement of capital. Corporate power dramatically increased at the expense of both workers and consumers as labor unions in the advanced market economies (especially the United States) were decimated by offshoring of production, corporate taxes and regulations were slashed, and countries competed to attract production by offering the most favorable terms to corporations. Overall, this resulted in lower growth rates and higher rates of unemployment in the advanced market economies of Europe and North America, as well as in Latin America and Africa, compared with those achieved in the 1950s and 1960s. However, it also facilitated rapid if inequitable economic growth in East Asia (especially China) and increasingly in India as well.

A broader use of the term neoliberalism includes the above features, but extends its meaning to cover an entire way of life. Superficially, the cultural and intellectual trends of the last 40 years may seem to have nothing to do with free market dogma, but some would argue that the two are intimately connected - both produced by a new experience of the world under the changed circumstances that followed the crisis of the 1970s. Everything from postmodernism to the revival of Christian fundamentalism, from game theory to evolutionary biology, from a new kind of consumerism centered on entertainment rather than consumer durables, to new forms of resistance like the Black Bloc - all of these can be understood as products of the neoliberal era. This blog will attempt to explore some of these connections.

It remains an open question whether the current crisis signals the end of neoliberalism. Certainly the political response to the crisis looks a lot like an intensification of neoliberal economic policies - perhaps surprising since it was the contradictions of the neoliberal system that gave rise to the crisis. Yet the major crises of capitalism over the last century have all been marked by a doomed attempt to use the familiar tools even after their efficacy had ended: think of Hoover's response to the Depression, or Nixon's resort to wage and price controls. One of our goals in this blog will be to understand why that should be so, and another will be an examination of the new ways of thinking that must necessarily come out of the crisis.